Advice privilege preserves confidentiality of communications between clients and lawyers when seeking advice about legal liabilities. It is a keystone of our legal system. Lord Hoffmann called it ‘a fundamental human right’.
In the UK most tax advisers are chartered accountants. In 2010 in Prudential, the Court of Appeal decided it couldn’t overturn 300 years of precedent (see [2010] STC 2802). The case now goes to the Supreme Court in November this year for a decision on whether advice privilege should be extended to include tax advice given by chartered accountants.
Chartered accountants give advice on the law. They are subject to professional controls and ethical duties comparable to those to which lawyers are subject, but their clients are denied comparable rights. If advice privilege really is a fundamental human right, then surely the law should respect that right where that advice is given by a suitably qualified professional adviser?
In any event, other developments such as the Legal Services Act have hastened the call for the law to reflect modern life.
The Legal Services Act aims to improve access to justice and to promote competition in the provision of legal services. However, there is now an ‘elephant in the room’ because lawyers can now participate in multidisciplinary practices with accountants for the first time.
What will happen in a multidisciplinary practice if a client seeks tax advice which can be given equally by accountants and solicitors? Will client A who was put through to a solicitor partner be able to claim advice privilege but client B who was put through to an accountant partner be denied it as the Legal Services Act seems to suggest? What if the client is looked after by a team of solicitors but the partner goes on holiday and the firm’s tax expert is a chartered accountant? Will his involvement deny advice privilege?
Multidisciplinary practices where lawyers and accountants can practise together will soon be here but the provisions in the Act relating to privilege are unsatisfactory and likely to give rise to serious practical problems.
The historic law on advice privilege does not sit comfortably with modern reality. Chartered accountants are subject to professional regulation and give skilled legal advice on tax.
In Prudential Charles J said ‘in my view Prudential have put forward a compelling and indeed unanswerable case that in modern conditions accountants have the expertise to advise on tax ... And have shown that accountants do what lawyers are described as doing in cases that establish legal professional privilege’.
In the 21st century the profession of chartered accountancy has developed in ways that judges of the past 300 years could not have anticipated. It is now time to recognise that the principles of the past no longer cater for legal advice given in the 21st century.
Ian Young, Tax Policy Manager, ICAEW Tax Faculty
